Bangladesh Mulls Decision on Award of Offshore Gas Blocks

Prime minister Sheikh Hasina has directed the energy division to send a proposal to the cabinet committee on economic affairs to award nine offshore gas blocks to two international oil companies, said officials.

The energy division had earlier sent a proposal and asked Sheikh Hasina, also in charge of the power and energy ministry, whether the cabinet or the energy ministry would award the offshore blocks.

Sources in the energy division said Hasina had opted to send the proposal to the cabinet committee on economic affairs, headed by finance minister AMA Muhith, which would decide whether the offshore gas blocks would be awarded, and if so, how many of them.

The proposal to the prime minister contained a detailed account of the process adopted in selection of the US company, ConocoPhillips, for extraction of gas from eight deep-sea blocks and the Irish company, Tullow Oil, from one shallow-sea block.

The sources, however, said that all nine offshore gas blocks may not be awarded to the international oil companies.

The government may award only three to four blocks to the two oil companies as it does not want to take any decision right at this moment about the blocks that are in the offshore areas which have also been claimed by India and Myanmar, said an official of the energy division.

Furthermore, the government thinks that it will not be a strategically correct decision to award all eight gas blocks to just one international company, the ConocoPhillips, said the official.

The Fakhruddin-led interim government had sent back a proposal by the energy division for awarding the blocks to the two American and Irish companies which were selected through open bidding by Petrobangla as the regime felt that only an elected government should award of the blocks.

ConocoPhillips was selected for being awarded the deep sea blocks 10, 11, 12, 15, 16, 17, 20 and 21, and was supposed to sign four production sharing contracts, each for two blocks. Tullow Oil was selected for block 5 through the bidding in February-May 2008.

Energy experts and rights groups were protesting against the inclusion of a provision for export of gas in the form of liquefied natural gas in the model production sharing contract (PSC) that will be signed with the foreign companies.

The country's energy experts said the "dangerous part" of the model PSC was allowing the international oil companies to export up to 80 percent of the gas extracted from any block in the form of LNG.

An expert said that the government should withdraw the export provision from the PSC before awarding the blocks to the companies.

BBC Monitoring. Copyright BBC.